As China’s Evergrande debt crisis deepens, unpaid small business owners speak of despair

SHENZHEN, China, September 16 (Reuters) – Wu Lei says his small construction company in central China has accepted the commercial role of real estate developer Evergrande (3333.HK) as payment for two years, but with the value of this document in question, your company is about to collapse.

China’s Evergrande group, with more than $ 300 billion in liabilities equivalent to 2% of China’s GDP, is in the midst of a liquidity crisis that is struggling to raise funds to pay its many lenders and suppliers.

Wu, 35, was one of nearly 100 protesters who stormed the country’s No. 2 real estate developer headquarters in Shenzhen this week, desperately looking for payment guarantees.

“We were working for Evergrande, so our suppliers entrusted us with the materials without us paying in advance. Now they are suing me, the courts have frozen my property and I sold my car. And I still have employees who have to charge, “he said.

The plight of Wu and many others like him has highlighted the extensive use of commercial paper in the Chinese real estate sector. Developers favor it because they prefer not to pay in advance and because it is not considered a debt that carries interest. The document promises contractors and suppliers payment on a future fixed date, usually within a year.

Ten 500,000 yuan ($ 78,000) with another 2 million yuan outstanding in March, Wu has now returned to his hometown of Kaifeng in Henan Province to pursue his claims in court, but is worried it will take months to resolve.

Evergrande says it is working hard to repay investors in its asset management products and is in talks with banks to renew loans, but has not mentioned smaller suppliers and contractors. Financial markets, meanwhile, have come at a price in possible defaults on bond payments and expectations are high for restructuring their assets.

It is unclear how much commercial paper Evergrande has issued as a group, but its flagship unit Hengda Real Estate Group Co. Ltd. revealed about $ 32 billion by the end of 2020.

Despite its huge debt burden, Evergrande’s name had been widely regarded in ordinary business circles until late last year and even its commercial role was traded in non-construction-related industries. .

A small business marketing and consulting business owner in one of the poorest counties in Guizhou Province said he had accepted Evergrande’s commercial role as a client and was expecting 1.5 million yuan in payment. it had now been two months since he should have been defeated.

“I feel depressed and sorry for my family, having to accompany me on a debt-ridden life,” he said. He declined to give his name, citing rumors of physical threats against protesters.

While the protesters were around a hundred on Monday, the number had dropped to two dozen by Thursday, and many lost hope or ran out of money.

A protester who only gave his last name Zhang left for Guangzhou on Wednesday after learning of rumors that the company would issue an ad from there.

“But I think they could just find ways to divide us by dragging us everywhere,” he said.

At least two protesters were arrested on Thursday, but others were digging there, sharing links in groups of protesters ’talks to get cheap yoga mats to serve as makeshift bedding while sleeping poorly. Read more

“I am reduced to sleeping on the street and eating everything I can get. I can’t afford to leave Shenzhen even if I want to,” said a shop owner in Jiangsu Province.

(1 $ = 6,4388 Chinese yuan)

Report by David Kirton; Additional reports from Clare Jim in Hong Kong; Edited by Edwina Gibbs

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